Many people assume that selling on an e-commerce giant like Amazon must carry a hefty price tag. But is that really the case? Here’s what you need to know about how much it costs to sell on Amazon:
Different Ways To Sell on Amazon
Amazon offers two different selling plans to choose from: an Individual Plan and a Professional Plan. Here’s what you need to know about each option so that you can make an informed choice:
The Individual Plan costs $0.99 per item sold, not including additional selling fees. This plan allows you to add new products to the Amazon catalog and utilize Fulfillment by Amazon if you so desire. Fulfillment by Amazon is the e-commerce giant’s platform allowing businesses access to Amazon’s logistics network; this mean that businesses don’t need to deal with the hassle of figuring out where to store, how to ship, and how to accept payment for their products. This plan is ideal if you sell fewer than 40 items a month, you’re still not completely sure which items you’re going to sell on the platform, and you don’t need any advanced selling tools.
The Professional Plan costs $39.99 a month, not including additional selling fees. Like the Individual Plan, this plan allows you to add new products to the Amazon catalog and utilize Fulfillment by Amazon. However, the Professional Plan lets you leverage a slew of additional opportunities including: the ability to apply to sell in additional categories, create listings in bulk, manage inventory, qualify for top placements, integrate API, set your own shipping fees, utilize on-site advertising tools, run promotions, and add multiple users to your account.
This plan is ideal if you sell more than 40 items a month and/or you want to sell products in restricted categories. You may also want to invest in the Professional Plan if you want access to APIs, more selling reports, and programs like Launchpad or Handmade.
How Much Does It Cost To Sell on Amazon?
Now that we’ve covered the two different Amazon selling plans, it’s time to move on to the other fees associated with advertising on this platform so that you can get a better idea of what it actually costs when all is said and done. Specifically, Amazon charges referral and fulfillment fees. Here’s what you need to know about these fees and others you may run into. It’s worth noting that any fees are subject to change at Amazon’s discretion at any time.
1. Referral Fees
Amazon charges referral fees on top of the base selling plan rate for each sale made. Also known as RFs, these fees vary depending on the category and are based on the total sale price, which is equal to the item price + shipping cost + gift wrapping, if applicable.
2. Fulfillment Fees
In addition to referral fees, there are also fulfillment fees that are based on the weights and dimensions of your products. With Fulfillment by Amazon or FBA, these costs cover things like picking and packing your orders, shipping and handling, customer service, and product returns.
On the other hand, if you choose to forgo FBA and fulfill orders yourself, Amazon charges shipping rates based on the product category and shipping service chosen by the customer and then provides you a shipping credit in the corresponding amount. Individual Amazon users cannot set their own shipping fees and must use Amazon’s set shipping rates for all products.
Professional Amazon users can set their own shipping fees, except for books, music, videos, and DVDs.
3. Other Costs
If you’re using FBA services, then you may also have to pay storage fees. For storage from January to September, the storage fee for standard size items is $0.75 per cubic foot and the storage fee for oversize items is $0.48 per cubic foot. For storage from October to December, the storage fee for standard size items is $2.40 per cubic foot and the storage fee for oversize items is $1.20 per cubic foot. Amazon may charge additional storage fees for products classified as dangerous goods and long-term storage fees for units that have been stored in an Amazon fulfillment center for more than 365 days.
For textbook rentals, Amazon charges a rental book service fee of $5.00 for each rental. Amazon also charges $0.005 per eligible item for active-non media listings that have not sold in 12 months. However, the fee is waived for the first 100,000 listings.
For returns, Amazon charges a refund administration fee that’s the lesser of $5.00 or 20% of the original referral fee.
4. Adding It Up
Since Amazon’s fees aren’t very straightforward, it can be challenging to figure out exactly how much it will cost for you to sell on this platform and if it’s profitable. Here are some examples to help you add everything up:
- Let’s say that you sell within the clothing and accessories product category. Your item costs you $5.00 and you list it for $20.00. With self-fulfillment and a $3.00 shipping cost, you have an $11.09 margin per sale taking into account the $3.91 referral fee.
- Let’s say that you sell within the toys and games product category. Your item costs you $10.00 and you list it for $30.00. With FBA, you have an $11.86 margin per sale taking into account the $4.50 referral fee and the $3.64 FBA fee.
- Let’s say that you sell within the furniture and decor product category. Your item costs you $50.00 and you list it for $200.00. With FBA, you have an $82.93 margin per sale taking into account the $30.00 referral fee and the $37.07 FBA fee.
Why Sell on Amazon?
Now that you know more about the costs of selling on Amazon, it’s important to talk about the benefits.
- Accessible: Start-up costs are a huge barrier to entry within the retail space. When you sell on Amazon, you minimize your start-up costs. All you need is an Amazon account, products to sell, and tools if you’re using the self-fulfillment approach.
- Reach: Selling on Amazon gives you access to 300 million active users. Of those 300 million, 200 million are Amazon Prime members. In 2020, Amazon generated $404.4 billion in global retail sales ($386 billion net profit).
- Loyalty: Amazon doesn’t just have hundreds of millions of casual users, instead, it has hundreds of millions of loyal and frequent users. For instance, Amazon Prime members spend an average of $1,400 per year on the platform.
- Competition: While Amazon may have a lot of competition, the platform offers a pretty level playing field that allows smaller companies to better compete with larger companies that would be hard to beat in a traditional retail space.
- Customer service: Amazon offers top-notch customer service to help retain its loyal customer base. Amazon troubleshoots shipping issues and also offers quick refunds and easy returns.
How To Sell on Amazon
Even though it may seem like selling on Amazon is easy, success on this platform isn’t a given. Here are some tips to help you effectively sell on Amazon:
- Set the right prices: It’s easy for customers to find the lowest price on Amazon, so make sure that you’re able to compete with other sellers by offering competitive pricing.
- Show off your products: It can be risky to buy products online without seeing them first, which is why product images and details are so important on Amazon. Make sure to take professional photos of your products from all angles and include key information including dimensions and materials.
- Earn social proof: Since buying online can be risky, buyers often look to reviews to ensure that the product is actually worth purchasing. Follow up with your customers and ask them to leave a review.
- Market your products: If you want a real leg up on the competition, then you should consider paying to advertise on Amazon. With your products at the top of the page, customers will be more likely to purchase them.
- Use Amazon Demand Side Platform (DSP): Amazon DSP is a demand-side platform that enables advertisers to buy display, video, and audio ads on and off Amazon. It’s a great tool for marketers of all sizes, but it’s most helpful to brands who sell primarily an Amazon that want to reach a broader audience.
Final Thoughts on Selling on Amazon
Now that you know how much it costs to sell on Amazon, it’s time to get started! If you want the best results on this revenue-generating platform, then you need the best marketing team to help you promote your products. MuteSix is an experienced Amazon ad agency that can help you optimize your ad spend to maximize category market share. Reach out today for a free marketing consultation!